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AIS's Health Business Daily
Featured Story September 22, 2008 Medicare Part D Plan Bids and Premiums Increase for 2009 Reprinted from MEDICARE PART D COMPLIANCE NEWS, a monthly newsletter on implementation problems and compliance strategies for the new Medicare drug benefit. By Barbra Golub, Managing Editor, (bgolub@aispub.com) Base payment rates to stand-alone Prescription Drug Plans (PDPs) for 2009 will rise by an average of 4.7% over 2008's rates, CMS said at an Aug. 14 press briefing. But the agency said the increase is nothing to be alarmed about. "Average plan bids have increased at roughly the same rate as drug costs," noted Paul Spitalnic, director of the Parts C and D Actuarial Group in CMS's Office of the Actuary. Abby Block, director of CMS's Center for Drug and Health Plan Choice (formerly known as the Center for Beneficiary Choices) says that the market is beginning to mature, "and it certainly appears clear that [Part D] plans, with each additional year the program is in place, have better information" upon which to base their annual bids. She adds in an interview with sister publication Medicare Advantage News that the 2009 rate increases are consistent among all sponsoring organizations, and describes some plan rate hikes for 2009 as "much more significant" than other plans' increases. Specifically, CMS said that the national average monthly bid amount for 2009 — which is a weighted average of standardized bid amounts for each PDP and Medicare Advantage prescription drug (MA-PD) plan — is $84.33, up 4.7% from $80.52 for 2008. CMS uses this benchmark to calculate the monthly capitation payment rate and base beneficiary premium. For 2009, the base per-member per-month (PMPM) reimbursement rate is $53.97, up 2.6% from the current $52.59, and the base beneficiary premium is $30.36, up 8.7% from the current $27.93. The 2009 contract year marks the end of the transition from equal weighting to enrollment weighting, said CMS. From 2007 to 2008, the agency transitioned from the 2006 method of equal weighting to a weighted average based on actual plan enrollment as of the prior year. During this period, the national average monthly bid amount was calculated using a composite of the simple average calculated using the 2006 weighting methodology and the enrollment-weighted average calculated based on actual plan enrollments. Now that the transition is over, said the agency, 100% of the national average monthly bid is based on the enrollment-weighted average. Estimated Premium Below Original Estimate CMS estimated that the average monthly premium for standard Part D coverage, for both PDPs and MA-PDs, in 2009 is $28. Although that is $3 above 2008's average premium, CMS noted that it is far below the original estimate of $44.12 for the 2009 average premium when the benefit was established under the 2003 Medicare reform law. This increase was attributed by the agency to general trends in drug costs, the phase-out of a CMS demonstration project, higher plan estimates for catastrophic coverage based on previous experience, increased utilization, and the introduction of new pharmaceuticals. Average monthly premiums for PDPs are projected to rise from $27 this year to $31 next year, according to CMS, although average monthly premiums for MA-PDs' drug coverage are expected to increase from $18 in 2008 to $21 in 2009. While most beneficiaries will see 2009 premium increases, some of which will be significant, Kerry Weems, CMS acting administrator, said at the press briefing that most beneficiaries will have access to Part D plans with equal or lower premiums than they have this year. Thus, it is important for beneficiaries to shop around, he said. In addition to releasing bid and premium information, CMS released Part D regional low-income subsidy (LIS) premium amounts. These amounts will increase by at least 20% for 2009 in California, Nevada, Colorado, and Wisconsin, and the amounts will decrease in five of 34 PDP regions, the agency said. CMS said it will reassign 1.3 million LIS beneficiaries to new PDPs effective Jan. 1, 2009, because their existing plans bid above the 2009 benchmarks. While plans now know whether they submitted bids that were below the benchmark and will be able to keep their LIS beneficiaries for 2009, CMS said it won't release plan-specific data until sometime in September, after next year's contracts are finalized. This impending reassignment of LIS beneficiaries is seen as highly significant to some industry analysts. "It probably means some PDPs with significant low-income membership today might have very little next year…because they bid above the benchmarks," said Pat Dunks, a principal and consulting actuary with the Milwaukee office of Milliman, Inc. Visit www.cms.hhs.gov/MedicareAdvtgSpecRateStats/ |
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